GKN in last-ditch bid to see off £7bn hostile takeover which is branded 'US national security risk'

Under-siege engineering firm GKN is set to reveal a turnaround plan this week as bosses try to fight off a hostile takeover.

In a crucial appeal, the British company is expected to pledge huge cash returns in a bid to win over shareholders.

These would be funded by cost cutting and the sale of its powder metallurgy arm, which uses powders to produce compacted metals for parts, and could fetch as much as £2bn.

On the defence: GKN makes parts for the Black Hawk, Chinook and Apache helicopters, as well as the F-35 jet fighter

GKN’s board hopes this will see off a £7.4bn bid for the business by turnaround specialist Melrose, which they are urging shareholders to reject.

The bid is also being scrutinised by both the UK and US governments, with a senior US congressman wading in to provide an unexpected boost to GKN.

House Republican Neal Dunn has urged the Committee on Foreign Investment to block Melrose’s bid over fears it would threaten US national security.

GKN, which is currently building an aerospace facility in Dunn’s Florida district, makes parts for the Black Hawk, Chinook and Apache helicopters, as well as the F-35 jet fighter and other secret US Air Force projects.

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Dunn said Melrose’s plan to sell the business within three to five years and possibly break it up was of ‘serious concern’.

In a letter to the committee, Dunn added: ‘GKN is a major US defence contractor. Melrose has no track record in defence contracting or relevant high technology businesses.

‘In addition to concerns over who may ultimately acquire GKN, Melrose’s business strategy will undermine long-term investments in research and development and secure supply chains, which are critical to the major defence platforms GKN currently supplies.’

Last night Labour MP Jack Dromey, whose Birmingham constituency is where GKN is based, said: ‘Transatlantic concern over the hostile takeover is growing.

Warning: Republican congressman Neal Dunn

‘Melrose is facing tough questioning in America and here in Britain ministers have the power to intervene. They should put the British national interest first and block this takeover on grounds of defence and national security.’

Last week Prime Minister Theresa May said government officials were watching the bid closely and would ‘act in the national interest’.

A spokesman for Melrose declined to comment.

The intervention comes before GKN’s make-or-break plan is due to be published on Thursday. The document will be the centrepiece of efforts to convince shareholders to reject Melrose’s offer.

The turnaround specialist swooped on GKN after the Redditch-based company was left vulnerable by a profit warning, sparked by accounting problems at its aerospace division.

The profit alert led to the departure of the then incoming chief executive Kevin Cummings who was the former head of the aerospace division. It meant GKN was without a boss until Anne Stevens was appointed in January.

Stevens and the board will this week pledge to sell GKN’s powder metallurgy business and return cash to investors. They are also expected to detail how they intend to transform the firm’s fortunes and make savings.

What does GKN make?

Parts including electrical wiring, wing flaps, cockpit canopy and engine components for Lockheed Martin’s F-35 fighter jets, which will form the backbone of the future US fighter fleet.

It also supplies components for the Chinook, Apache and Blackhawk helicopters, as well as the V-22 tiltrotor military aircraft.

Other US projects GKN is involved with include development of the B-21 bomber aircraft, a long-range stealth plane that is expected to come into service in 2025.

Melrose said it would offload the powder metallurgy arm in a few years, after making it more profitable, rather than selling it immediately. It added: ‘If these reports are correct, then it is an indication that GKN’s management team is admitting they are not equipped to realise the full value of that business.

‘Shareholder approval will be needed for a sale and we think GKN shareholders will want to see value realised for them and not for another bidder.’